What the Fed's interest rate cut means for the U.S. economy

As growth flags, the Fed moves in

The Federal Reserve building.
(Image credit: iStockphoto)

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The Federal Reserve cut its key interest rate this week to protect the "record-long economic expansion from slowing global growth," said Christopher Condon at Bloomberg. The quarter-point cut is a signal from the central bank that it hopes to get ahead of a potential slump. Economic growth slowed to 2.1 percent in the second quarter, falling a full basis point below the first-quarter number. Though a rate cut is what President Trump — who tweeted that the Fed "let us down" by rejecting a bigger cut — has called for, it's actually a sign that Trump's "supercharging of growth hasn't worked" as advertised, said Matthew Yglesias at Vox.com. For two years, Trump has promised to achieve a "sustainable 3 percent economic growth rate by slashing government regulations and business tax rates." That's looking like an illusion. Early estimates of 2018 growth seemed to show that Trump might have met the target in 2018, but the latest data have made the government revise the numbers downward to 2.5 percent. The economic expansion under Trump has been merely "fine" — as it was in the later part of the Obama presidency.

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